Macau Casino Mogul Lawrence Ho to Operate New Russian Casino

By Yvonne Lee , Prudence Ho

HONG KONG—Macau mogul Lawrence Ho is set to become Russia’s first brand-name casino operator, as China’s neighbor to the north enters the fray to compete for the wealthy Asian gamblers that made Macau the world’s gambling capital.

A company controlled by Mr. Ho signed an agreement to open a casino on the outskirts of Vladivostok, a person familiar with the deal said. The planned casino resort in Primorye—a vast eastern region bordering China and Korea—is scheduled to open in the second half of 2014, and will be one of the first in Russia after the country in 2009 banned casino gambling outside four special zones, the person said. The company is still discussing the project’s investment size, the person added.

The news is a boost for Russia’s casino industry, which is seldom on the radar of casino executives and bank analysts because of corruption concerns and lack of clarity in its casino regulatory structure.

But some analysts say Russia’s proximity to northeast China, its low tax rate and its low investment criteria—potentially only a couple hundred million dollars compared with the billions casino operators spend on new resorts in Macau—are reasons enough to invest.

“A lot of people don’t realize that Vladivostok is an Asian casino opportunity that happens to be in Russia,” said Dean Macomber, president of U.S.-based Macomber International, Inc., which did consulting work in the Russian casino industry.

Gaming Market Advisors, another U.S.-based firm, said in a 2012 report for the Primorye government, that annual gambling revenue in the region could total about $1.2 billion initially and rise to as much as $5.2 billion as the market ramps up over the next 10 years. The group estimated taxes would amount to just 3% to 7% of that revenue, compared with Macau’s 39% tax rate on gambling revenue.

Mr. Ho has been looking for investment opportunities beyond Macau, the world’s biggest gambling market, which his father Stanley Ho monopolized until the government opened the Chinese territory to international operators more than a decade ago.

Lawrence Ho and James Packer, the son of late Australian gambling and media magnate Kerry Packer, co-chair Melco Crown Entertainment Ltd., one of six casino license holders in Macau, whose $38 billion in annual gambling revenue is six times that of the Las Vegas Strip’s.

Messrs. Ho and Packer are also building a casino-resort slated to open in 2014 in the Philippines’ Manila Bay area.

Russia’s Primorye government began inviting bidders for casino projects in the summer of 2012 and chose Summit Ascent Holdings Ltd., which is 37%-owned by top shareholder Mr. Ho, the person familiar with the matter said. The resort will be 12 kilometers from the Vladivostok airport.

In March, Russian news agencies reported that the Primorye governor had picked five potential casino builders for the project from the U.S., Malaysia, Russia, Macau and Hong Kong to present designs. It is unclear how many companies might build casinos in Vladivostok, which hosted the 2012 summit for leaders from the Asia-Pacific Economic Cooperation forum.

The other three zones open to casino investment in Russia are Altai territory, Kaliningrad region and Krasnodar territory. They are all in relatively remote parts of Russia and much farther from China, where gambling is limited to the former Portuguese enclave of Macau.

For Chinese in the north of the country, a trip to Vladivostok is quicker than one to Macau, the only part of China that allows casino gambling. From Beijing, a flight to Macau takes three hours and 45 minutes, compared to the 2.5 hour flight to Vladivostok. Harbin, the largest city in China’s Heilongjiang province, which is known for its ice sculptures, is an hour and 20 minutes by plane to the Russian city. It is common for Russians to drive to the Chinese border to go shopping, and many Chinese come to Vladivostok for work and tourism.

Shares of Summit Ascent, which is 37%-owned by Mr. Ho, have been suspended from trading since June 10 as the company discusses its new business model with the Hong Kong stock exchange. The deal to open a casino in Vladivostok could trigger a reverse takeover of Summit Ascent, allowing Mr. Ho to list his casino assets on the stock exchange without having to launch an initial public offering process.

–Kate O’Keeffe in Hong Kong and Greg White in Moscow contributed to this article.